TMI Blog2013 (9) TMI 606X X X X Extracts X X X X X X X X Extracts X X X X ..... ying upon the decision of Rajasthan High Court in case of Udaipur Mineral Development Syndicate Pvt. Ltd. vs. DCIT [2002 (8) TMI 26 - RAJASTHAN High Court], we allow the liability of sludge disposal charges accrues the moment the sludge is generated and accordingly the provision for sludge disposal charges ought to be allowed as deduction under section 37 of the Act as the same is provided following the mercantile system of accounting. In the result, the issue is decided in favour of the assessee - Decided in favour of assessee. Assessee has considered 10% of interest income amounting to Rs. 2,53,882/- as being expenses incurred for earning the interest income. We find that whether the expenditure incurred has a connection or nexus with the interest receipt has not been examined by lower authorities and there is no finding to that effect - Assessing Officer is therefore directed to verify the nexus between the expense incurred and the interest income and thereafter consider its allowability the same as per law and after giving a reasonable opportunity of hearing to the Assessee - Decided in favour of assessee. - ITA Nos.2224 & 2225/AHD/2010 - - - Dated:- 26-7-2013 - G.C.GUPTA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent. The issue raised in the aforesaid grounds in only with respect to sludge disposal charges:- 5. During the course of assessment proceedings, Assessing Officer noticed that the modus operandi of the business is that the effluent of SSI Unit members is collected through approved rubber lined tankers at the place of the assessee company. Before unloading the effluent in a common tank, a sample is obtained from the tanker for the purposes of testing of its quality. Thereafter, this effluent is treated in primary, Secondary and Tertiary treatment as required and the it is drained off into the GIDC common drainage system and sludge generated is disposed off as per norms of GPCB. Further, the Assessee company has entered into an agreement with each member for providing such facility. Every member is required to pay unavailed tanker charges, in case they do not fulfill the commitment about the number of tankers that they have agreed to bring as per the terms and conditions of the said agreement. He noticed that the Assessee had debited 1,28,48,714/- under the head sludge disposal charges which included provision made for Rs. 6,15,015/-. The Assessee was asked to justify the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 011 has decided the issue in favour of Assessee by holding as under 9. We have considered the rival submissions. It is brought to our notice that ITAT Ahmedabad "A" Bench in the case of the same assessee considered the identical issue of disallowance of provision made in respect of sludge disposal charges in various years in ITA No. 734 - 736/Ahd/2007 and C. O. No.5/Ahd/2007 for assessment years 1999-2000, 2001-02, 2002-03 and 2003-04 and the claim of the assessee has been allowed vide order dated 04-02-2011. The relevant findings in Para 9 and 10 are reproduced as under: "9. We have heard the rival contentions and gone through the facts of the case. We find that the assessee-company Enviro Technology Limited is engaged in Common Effluent Treatment Facility for the treatment of effluent (Waste Water) generated from 225 member industries. The assessee explained the sludge generation process along with justification on sludge disposal charges by stating that the waste water is in the highly acidic nature and also containing organic chemicals. The waste water is received by rubber lined tanker and Unloaded in the under ground tank specially constructed by acid proof tile liner. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osal charges incurred are not comparable with each other because of the complex nature of the effluent. Further, the company has entered into an agreement with each member for providing common effluent treatment facility. Every member has to pay unavailed tanker charges. In case, he does not fulfill the commitment about the number of tankers that he has agreed to bring as per the terms and conditions of the said agreement during the year, the un-availed tanker charges received have been reduced from Rs.31,36,500/- to Rs,25,96,000/- which again justifies the increase in Sludge generation and consequently the increase in Sludge Disposal charges. In view of the above facts and procedure the sludge disposal charges incurred in March, 2000 and March, 2001 are higher compare to whole of the year, as the sludge generated has to be dried up in Sun and accordingly the sludge disposal charge of year. The assessee has enclosed the details of sludge dispatched during the month, which justifies aforesaid facts. It can be observed that sludge dispatched during the year had major portion of the sludge disposal charges incurred during the aforesaid months. 10. We find that the Sludge is generate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ludge disposal charges accrues the moment the sludge is generated and accordingly the provision for sludge disposal charges ought to be allowed as deduction under section 37 of the Act as the same is provided following the mercantile system of accounting. In the result, the issue is decided in favour of the assessee. By following the same order we set aside the orders of the authorities below and allow the claim of the assessee for deduction. In the result, ground no. 1 of the appeal of the assessee is allowed. 11. Before us, the Revenue cold not bring any material to distinguish the decision of Tribunal in assessee s own case nor could bring any material to distinguish the facts of the case with that of earlier years. We therefore respectfully following the order of Co-ordinate Bench for A.Y. 2005-06 set aside the order of Assessing Officer and allow the claim of the Assessee for deduction. Thus this ground of Assessee is allowed. 12. In the result the appeal of the Assessee is allowed. ITA No. 2225/Ahd/2010 (A.Y. 2007-08) 13. Grounds raised by Assessee reads as under: a. Disallowance of provision made for Sludge Disposal Charges amounting to Rs. 6,96,574/-. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the interest income Rs. 1,38,46,144/- Less: Interest income Rs. 36,90,144/- Eligible profit for deduction u/s. 80IA of the I.T. Act Rs. 1,01,55,970/- Allowable deduction u/s. 80IA Rs. 1,01,55,970/- 17. Aggrieved by the order of Assessing Officer, Assessee carried the matter before CIT(A). CIT(A) upheld the order of Assessing Officer by holding as under:- 6.1 During the previous year, the appellant has earned other income amounting to Rs. 36,90,144/-. The break-up of the Other Income as reflected in Schedule 15 of the Accounts is as under: Sr. No. Particulars Amount 1 Interest on fixed deposits 5,85,368 2 Interest on loan 24,07,233 3 Interest on I.T. Refund 1,31,590 4 Interest on delayed payment from customers 5,65,953 Total 36,90,144 It was found by the Assessing Officer that while calculating the eligible profit for deduction u/s. 80IA of the Act, the assessee has reduced Rs. 25,38,823/- only as against interest income of Rs.36,90,144/-. The assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest earned out of delayed payments from customers as such an interest was having business nexus. Following the same decision, in this ground, the AO is directed to include the expenditure incurred by the appellant in earning such interest. Since the appellant has not incurred any expenditure in earning interest from payments from customers, the action of the AO in this context is upheld and thus, this ground of assessee is dismissed. 18. Aggrieved by the order of CIT(A), Assessee is now in appeal before us. 19. Before us, the learned A.R. submitted that Assessee has considered 10% of expenses for earning interest income for which he also relied on the decision of Special Bench in the case of Lalson Enterprises (2004) 89 ITD 25 (Delhi) Special Bench. He further submitted that the issue has not been examined in the light of the aforesaid Special Bench decision and therefore the same needs to be examined and therefore, the matter be remitted to the file of Assessing Officer. The learned D.R. on the other hand relied on the order of Assessing Officer and CIT(A). 20. We have heard the rival submissions and perused the material on record. We find that Assessee has considered 10% ..... X X X X Extracts X X X X X X X X Extracts X X X X
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